4 Ways You're Accidentally Committing Credit Card Fraud

February 25, 2019

Credit card fraud is a broad term for theft and fraud committed using a credit card. Usually, it’s associated with stolen or compromised information and unauthorized credit card charges, but sometimes it’s the legal cardholder who’s unintentionally committing the crime.

Credit card fraud law covers a wide range of activity, and the terms and conditions of credit cards are lengthy and difficult to understand. Combine both of those and it makes sense that consumers can unknowingly break the law.

Committing credit card fraud, whether it’s on purpose or by accident, can carry legal and financial consequences and might impact your ability to obtain future credit or even open a bank account. Keep the law on your side by knowing what to watch out for.

1. Using someone else’s credit card.

If you use someone else’s card without permission, it’s fraud. Everyone knows that. But there are similar situations that aren’t illegal but do break the terms of your contract with the card issuer. For example, just giving someone permission to use your card, signing a credit card slip on behalf of a user, or simply allowing someone to punch in your credit card numbers to help make a purchase are all deal breakers.

When you break the terms of your agreement with a creditor, you can’t dispute any of the activity or make claims against those charges. As far as the creditors are concerned, it’s your problem. That’s something to think about the next time Grandma needs help ordering something off Amazon.

2. Using a fake credit card number to sign up for a free trial online.

Want to sign up for a free trial of an online service or samples of a product? You’ll probably have to provide a credit card number, which will eventually get charged if you forget to cancel your service — which is likely. There are several sites that offer “fake” credit card numbers for people who just want to sign up for free trials online or receive samples without providing any real payment information. These sites claim the credit card number is 100 percent fake and won’t pass a verification test if the website runs one.

The legality of this practice is debatable. California Penal Code 532a, “Theft by False Pretenses,” does contain some language that some people feel applies to using fake credit card numbers. Though the sites giving away these numbers claim they are operating within the law, it’s difficult to separate the supposedly legitimate sites from the shady ones. You’ll risk unknowingly using a stolen card number or unintentionally breaking the law.

Even if the fake credit card number is legal to use, you could be breaking the terms and conditions on the site offering the free trial. It’s best to stay on the safe side and just use your regular, valid credit card and set a reminder to cancel your subscription before you get charged.

3. Disputing your own credit card charges.

Chargeback fraud, also known as “friendly fraud,” happens when a consumer makes an online purchase with his credit card and then calls the card issuer and requests a refund, citing fraud. The bank refunds the money and the consumer keeps the goods, leaving the merchant on the hook for the cash.

In some cases, the consumer forgets which charges he made and in some, he’s intentionally committing fraud. Before you head down this road, make sure the charge wasn’t yours. It’s hard to remember every little transaction and some retailer transactions look unfamiliar on statements. For example, third-party payments systems, like PayPal, use the merchant’s name.

One of these is an honest mistake; the other is outright fraud. If you are intentionallycommitting chargeback fraud, it’s ends up costing retailers $11.8 billion a year, which will eventually get passed down to consumers. And it’s 100 percent illegal — you are exposing yourself to a host of consequences, including jail time.

4. Lying on your credit card application.

Mistakes happen, but intentionally giving false information, like your age or income, on a credit card application can land you in legal trouble, including being charged with theft by deception and larceny. Penalties vary, but can include: fines, probation, community service or jail time. You can even face criminal charges – especially if you end up defaulting.

Kim McGrigg, manager of community and media relations for Money Management International, told Fox Business, “Lying on a credit application purposefully is fraud. It may not be prosecuted aggressively, but the potential is too great for people to risk being caught.”

Even if you don’t face legal action, there are other consequences to consider: interest rate spikes, closed accounts, poor credit history or the inability to open a bank account. The bottom line: It doesn’t pay to lie on an application just to get a higher credit limit or better terms.